The increase in the car cess will definitely going to dent the festival sales.NEW DELHI: As the Union Finance Ministry on Saturday reveals three slabs of cess for mid-size cars, SUVs and luxury cars; carmakers express concerns as it will lead to price hike of majority of the cars.

"The taxes on this industry were already very high and we expected the unfulfilled potential of this segment to increase after the implementation of GST and rationalization of taxes. Even if the rumoured cess hike of 10% was not concluded, the prices will go up again, which is disappointing. We will need to study the impact of this hike on the buyer sentiment," said Rahil Ansari, Head, Audi India.

Majority of the industry leaders echoing the Ansari’s point of view calling the move an unfortunate decision. While majority of carmakers ETAuto contacted said that the prices will be increased on most of the cars as the additional cess hike would be passed on to the customers. This will also dent some demand of the festive season.

M.S Mani, Senior Director, Deloitte Haskins & Sells LLP, said: "The increase in the cess on most cars, excluding small and hybrid cars, was widely expected and would make the car manufacturers roll back some of the price reductions that they had announced after the onset of GST."

FADA president John K Paul says, "The festival season is just around the corner and we hope its implementation would wait till then. A six month study would've given a better idea whether the revenue increase was sufficient to tide over the drop in income.”

Roland Folger, MD & CEO, Mercedes−Benz India, on the recent GST Council’s decision on cess hike of large cars and SUVs commented, “The decision to increase the cess yet again is unfortunate and totally overlooks the contribution we make to the industry and to the economy. Though the luxury car industry’s volume contribution is very low, our value wise contribution is much higher and that has immense potential to grow even more in the future, had there been fair taxation. However, by continuous taxation of the segment, the overall revenue generation is going to be hurt, as the increase in the price is going to hurt demand.

He also added, "It seems the contribution of the luxury car industry to the total PV market in India will remain constricted, though in the other developed economies, it is on a higher side and continues to rise gradually. With this increase in cess now, the prices are bound to leap back to the pre-GST regime, in some cases higher than the pre-GST regime, thus negating altogether the benefits of GST regime.”

Today, in the 21st meeting of GST council, the decision on cess hike has finally been taken. After the meeting, Arun Jaitley, Finance Minister, said, "The mid-size cars will attract two per cent hike, five per cent hike on luxury cars and seven per cent hike on SUVs."

Prices of most SUVs were cut between Rs 1.1 lakh and Rs 3 lakh following the implementation of GST, which subsumed over a dozen central and state levies like excise duty, service tax, and VAT from July 1.